Ginsburg, et al., (“Ginsburg”) were the plaintiffs. They owned
a home, presumably a rather nice home, in Westchester County, New York.
Unfortunately, their home was damaged by a fire in March, 2005. Fortunately
Ginsburg had a contract, aka a homeowner’s insurance policy, with
the defendant, Charter Oak Fire Insurance Company (“Charter Oak”).
Upon receiving due notice of the fire damage, Charter Oak wrote a check
to Ginsburg for a sum exceeding $2,000,000. A portion of this sum, $720,000,
represented compensation for damage to Ginsburg’s personal property.

Note that in legal terms, ‘real’ property refers to real estate
– land and buildings affixed thereto. Personal property is basically
everything else: cars, computers, pencils, clothing. Do not be confused
by the names! The home owner’s insurance policy in this case, as
in most cases, drew a distinction between coverage for the house itself
and the possessions contained within the house. There are perhaps many
reasons for this, but one of the major ones is that the value of the building
is relatively fixed: a certain price was paid for it by the owner, the
tax assessors periodically re-value it, etc. Personal property represents
an unknown quantity. Did the homeowner buy the Mona Lisa the night before
the fire? Did he or she store massive quantities of gemstones in the attic?
Further, after some kind of casualty (the insurance term for events like
fire/flood/theft) it can be difficult to ascertain what was actually present
in the home. For this reason, there are often limitations on the amount
that will be paid for the loss of personal, or non-real-estate, property.

This particular insurance policy, or contract, was no different. Plaintiffs
claimed that various circumstances entitled them to additional payment
for loss of personal property above the $720,000 already received.

In addition, plaintiffs sued for breach of contract, alleging they were
owed more for the damage to their real property. Interestingly, the insurance
policy provided for an alternate dispute resolution procedure –
a hearing before a neutral “umpire.” The umpire valued the
damage plaintiff’s house in excess of what the insurance company
had determined. In compliance with the umpire’s ruling, the insurance
company paid the plaintiffs an additional $500,000 for damage to their home.

Plaintiffs still were not satisfied, and sued for breach of contract, alleging
they were owed interest on the $500,000 during the period that had elapsed
from the $2,000,000 payment and the $500,000 payment. They also maintained
their action for additional recovery on the personal property casualty.

Analysis

The court upheld the lower court’s reasoning. The rule in New York
was that under a fire insurance policy, after a loss, the insured may
not receive interest on the amount payable (or principal amount) under
the policy before the principal amount is due. In this case, the insurance
company, under the plain language of the contract, had sixty days to make
a payment after “the filing of an appraisal award.” (The appraisal
award was the umpire’s determination). Here, the insurance company
made the $500,000 payment within sixty days. Thus the language of the
contract was satisfied – there was no breach. The New York rule
operates to defeat plaintiff’s claim for interest on the $500,000.

The second claim was for additional recovery for personal property loss.
The court placed a great deal of emphasis on the plain and unambiguous
language of the contract. The contract set a maximum amount (Approximately
$700,000) for personal property, adjusted for inflation. Thus, plaintiff’s
various arguments were unavailing - $720,000 represented a ‘cap’
(including the inflation adjustment) on recovery.

Insurance contracts, especially in the difficult circumstances following
a fire or other loss, can be tricky to navigate. Please don’t hesitate to
contact our office for a consultation.